A Free-Market Energy Blog

“Substituting CO2 taxation for existing levies is not the tax debate from the conservative/free market side. The debate is about the flat tax versus a consumption tax as fundamental tax reform. And, hypothetically, if Malthusian decarbonization were to come about, what would be revenue-neutral?”

“In Neeley’s defense, he switched sides assuming that Obama energy policy would continue at the federal level. That way, he could argue [in his lucrative new position] that a CO2 tax was the least worst policy compared to cap-and-trade and existing command-and-control (still a weak argument). But Trump won, and the tide went out… [leaving] Neeley exposed an energy/climate progressive (statist).”

He is playing defense–and convincing few real conservatives and libertarians. His lawyer-like brief for pricing CO2 ultimately rests on climate alarmism and the Malthusian worldview, as much as he minimizes or ignores this baggage. As such, R Street’s energy director become virtually indistinguishable from Far Left carbon-tax proponents James Hansen, Bill McKibben, and Al Gore.

Bad intellectualism and bad cosmetics, indeed.

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Neeley’s op-ed published last week in the Washington Examiner is parsed in red; I indent and comment in black.

Hi, my name is Josiah, and I am a conservative who supports a revenue-neutral carbon tax. To many people, especially those on the Right, that may seem like an odd combination. In fact, some people might assume that if I’m for a carbon tax, I can’t really be a conservative.

Why yes, his attempt at humor aside. A big double-digit salary increase did just this. It is an open secret that Left funding has created two front (fake) “free market” think tanks regarding climate/energy (if not more): Neeley’s R Street for “conservatives” and the Niskanen Center for “libertarians.” It is known that very large salary increases have been offered for turncoating on the climate issue for key staff (as much as double in one case concerning an IER employee).

In Neeley’s defense, he switched sides assuming that Obama energy policy would continue at the federal level. That way, he could argue that a CO2 tax was the least worst policy compared to cap-and-trade and existing command-and-control (still a weak argument).

But Trump won, and the tide went out. The real energy policy debate is not about picking your poison. It is about energy freedom. A carbon tax (and the rest of it, such as his support for wind power subsidies) have left Neeley exposed as an energy/climate progressive (statist).

I can understand the skepticism (although, sadly, my bank account doesn’t bear out the dump truck theory). I used to be a carbon tax skeptic myself. Over time, however, I found that the arguments I deployed against a carbon tax were chipped away until they felt more like excuses.

Yes, you were a critic–and a pretty good one. Tell us more about your conversion experience. And explain how a reversal of federal policy away from climate activism/alarm has made your case somehow stronger.

What are the arguments against a carbon tax? To begin, carbon tax skepticism is often rooted in climate change skepticism. This can take a variety of forms, ranging from thinking climate change isn’t happening to believing global warming is actually a good thing.

This is a vague, confusing summary of the physical science debate about CO2 emissions. The debate is not about “climate change skepticism.” The debate is about the weak, weakening case for climate alarm, leaving the clear benefits of CO2 fertilization. It is about the positive side of “global lukewarming” from the enhanced greenhouse effect. Neeley (and R Street) clearly do not want to summarize physical-science trends, an intellectual oddity.

Another main argument against a carbon tax is it would be damaging to the economy and it would be regressive — hurting low-income households the most. Finally, carbon tax skeptics make a political argument: Even if a carbon tax could work in theory, it’s never going to happen, and if it did, we can’t trust government to implement it the right way.

Correct except for “never going to happen“. A carbon tax is a real threat, a key battle ground, a “commanding height,” between statism and freedom. Avoiding forced decarbonization is crucial given the ecological (not just economic) problems of wind power and central-station, on-grid solar.

“Even if a carbon tax could work in theory …” is the perfect knowledge, perfect implementation argument that classical liberalism rejects coming and going. This gets straight to the Mises/Hayek argument against central planning–in this case, global government to “plan” climate.

Note that Neeley is for a tax but does not specify how much. What will it be based on, and how it that not scientism? What if the tax is too “high” or “low” from the “right” perspective–a reason to not introduce a new fiscal regime in the first place?

While each of these concerns are valid, it’s possible to structure a carbon tax in a way that avoids them.

In the real world–or in your head? The latter assumes perfect knowledge about the alleged problem and perfect implementation of the alleged solution…. Classical liberal theory, anyone?

Concerns about the economic costs of a carbon tax, for instance, can be addressed by making the tax revenue-neutral. In other words, revenue generated from a carbon tax can be used to cut other more burdensome taxes, thereby canceling out the economic cost of the tax even before environmental benefits are considered.

And setting up a bar at AA meetings could encourage responsible drinking. It is incredibly naive to believe that giving government a NEW revenue source will not leave existing government revenue sources in full play. CO2 taxation is a qualitative expansion of government, not only a quantitative one.

“Revenue neutral.” For whom? Over what time period? What are the rules, and if this is more than a mental construct, would a constitutional amendment be necessary to achieve “neutrality”?

For example, a system where half the revenue from a carbon tax were used to cut payroll taxes, while the other half were used to cut capital gains tax rates, could boost overall economic growth while protecting low-income workers.

Substituting CO2 taxes for existing levies is not the tax debate from the conservative/free market side. The debate is about the flat tax versus a consumption tax. And, parenthetically, if Malthusian decarbonization were to come about, what then would be “revenue neutral”?

A revenue-neutral carbon tax could also side-step arguments about climate change, since such a tax “swap” could be appealing even if it has no effect on global warming. Art Laffer, the intellectual godfather of President Ronald Reagan’s supply side economics, claims to be agnostic about global warming, but still favors a revenue-neutral carbon tax because of the potential for economic growth.

Neeley would love to “side-step arguments about climate change.” And he is correct to note that his tax might (“even”) have “no effect on global warming.”

Art Laffer? This is just a name drop. All of the arguments made here against Neeley apply to the very brief, unsubstantiated claims of Laffer in the linked video. Public Choice? Equity adjustments? The “right” tax?

It is circular reasoning to claim I (Neeley) is right because of Laffer made the same arguments. Laffer, by the way, urges humility toward the issue of global warming. Might his views be different now (versus 2012) that temperatures have been flat and Trump has put the issue into political play in unexpected ways?

Of course, we would all like taxes to be as low as possible. But unless you are an anarchist, you have to concede that some amount of tax revenue is necessary to fund the government. A revenue-neutral carbon tax offers the benefit of redirecting taxation away from things we want more of — like work and investment — and toward things we want less of (or at least don’t care so much about). Taxing carbon emissions is a better way to go about raising revenue, both economically and morally, than taxing work and investment.

Libertarian tax policy is not about the Malthusian agenda of taxing industrial progress. Public finance 101 is about a broad tax base that does not tax politically incorrect goods.

” … toward things we want less of (or at least don’t care so much about)” sounds like a let-them-eat-cake argument.

In addition, a carbon tax provides an alternative to existing and potential environmental regulations. From the Clean Power Plan to vehicle efficiency standards, the law is riddled with burdensome regulations that would become redundant if a carbon tax were achieving the same goals at a much lower cost. In fact, since a carbon tax would have the side effect of lowering emissions of non-greenhouse gas pollutants, even some non-carbon-related regulations could be repealed as part of an overall carbon tax deal.

This pre-Trump “inevitability” argument is no longer an excuse for surrender to climate alarmism/forced energy transformation. Conservatives and libertarians are on the offensive against Malthusian statism. They do not want to pick a poison–they want to defeat the worldview and public policies of the Progressive Left.

What about the political argument? One of the most common responses I get when I lay out my case for a conservative carbon tax is that the Left will never agree to it. Implicitly, this criticism seems to concede that a revenue-neutral carbon tax is good conservative policy; so good, in fact, that liberals wouldn’t support it.

Of course the Left will not agree to a carbon tax that is premised on taking away regulation/intervention elsewhere. They want all all-the-above intervention to make energy more expensive and control/cap human progress.

If Neeley does not see the game plan for pricing carbon dioxide by any means–why the Left foundations are supporting R Street and paying his salary premium–he is naive indeed.

It’s probably true that some on the Left would not support a conservative carbon tax. Some prominent environmental groups opposed a 2016 ballot initiative in Washington state that would have established a revenue-neutral carbon tax because the money went to tax cuts rather than environmentalists’ pet projects. On the other hand, there are also left-of-center folks who sincerely care about climate issues and would be willing to support a revenue-neutral carbon tax even if it came from conservatives.

Ditto to my response above.

More fundamentally, though, since when has conservative support for a policy depended on whether it was acceptable to the Left? Plenty of policy ideas start out with minimal support, only to gain ground as people come to see the merits of the position.

Bad ideas with minimal support do not need to grow–they need to die.

A conservative carbon tax would roll back environmental regulation, reduce the overall tax burden, and provide a solution to an environmental issue that is a growing concern to the public.

Fantasy. Public Choice, the study of government incentives and practices in a Democracy, is an intellectual touchstone to conservatives and libertarians–Neeley should study and apply it to the climate-tax debate.

” … provide a solution …”Is the author a climate alarmist? (Tell us more and why) And please tell us how the tax will “solve” the climate “problem.” Specifics please. (The RFF climate calculator computes the energy-price effects of a range of carbon taxes–please take the last step to show how your carbon-tax choices affect temperature, sea level rise, etc.)

” … an environmental issue that is a growing concern to the public.” Neeley needs to persuasively tell us whether this “issue” is real or exaggerated. But does he want to go there?

It’s a good idea rooted in conservative principles, and principled conservatives should support it.

False. The conservative/libertarian position is to not price or otherwise regulate carbon dioxide.

18 Comments

it’s almost comical, were it not so sad, but free(r) markets are reducing carbon emissions better and faster than anyplace with statist intervention. See Georgia v California or US v EU. You don’t have to be a climate skeptic to believe carbon tax is NOT a good thing, it is only, maybe, the best of a limited set (intentionally limited?) of government interventions. Open your eyes and heart to that which actually works best R Street.

If support for a revenue-neutral carbon tax by free market advocates is a function of filthy lucre, where are my checks?

It’s a shame to see this blog descend to the use of ad hominem attacks (and appeals to tribal loyalty). If the libertarian argument for doing nothing about the threat of climate change were so strong, I’d think it could be made without resort to such arguments.

This is less ad hominem attack as history of energy thought. As a historian of energy thought, I am explaining why Neeley and Taylor switched sides. In your case, I’m sure there are great benefits to being politically correct in Left academia–a very big thing! But I’m not sure you advocate a real-world carbon tax versus just in theory.

It is fine to have a mental experiment on a carbon tax being better than X or Y carbon pricing — but as a classical liberal, you have to ditch Public Choice and Austrian economics (and even some Public Finance 101) to argue for a real-world carbon tax. And border adjustments (global tariffs) and equity adjustments. And make a call that climate science is trending alarmist (it is not).

And, in addition, how can a classical liberal stomach all the Malthusian, Left baggage about the issue? CO2 pricing is the statists’ ‘Commanding Height’.

“In your case, I’m sure there are great benefits to being politically correct in Left academia–a very big thing!”

Well, Rob, in your case, I’m sure there are great benefits to taking positions that align with those of IER’s funders–a very big thing! But you don’t see me making arguments suggesting that this explains your policy positions. It’s a shame that it is so difficult for you to engage without such insinuations — and also telling.

Classical liberalism first, hope the funding follows. A lot of us don’t make the money as we would on the other side (and certainly there are a heck fewer jobs). We certainly do not get the awards and press–but a Julian Simon award will have to do!

Jonathan, go ahead. Try to explain my positions in terms of funding and not core analysis. I’d love to know where I have compromised/sold out. You once questioned my position on Eminent Domain–simple answer. It is wrong and I have blogged about it. I have books, even treatises, behind most of my positions and would never switch sides for a big salary increase. Yet that is what is going on at R Street and other fake free market groups on climate and energy.

I asked a lot of questions in my previous post to you that deserve an answer. Maybe you can just say Public Choice and global government and the rest of it does not apply somehow or that it doesn’t matter because you are not a classical liberal. (Do you support the court cases against the oil companies–what Jerry Taylor and Niskanen Center are pushing? Love to hear that one.)

Maybe your professorship within Left academia has nothing to do with your CO2 position. Maybe you are receiving no benefits from your switch. But until I understand how a classical liberal can embrace CO2 regulation, color me very suspicious….

Jonathan Adler: “It’s a shame to see this blog descend to the use of ad hominem attacks (and appeals to tribal loyalty)”.

I’m sorry, but I can’t find any ad hominem personal attacks in the above article.

As for the purported appeal to “tribal loyalty”, I assume you mean ideological loyalty? At least Bradley’s position is fully transparent and does not mask some non-market “solution” as a market solution (as does Cap & Trade).

(As to the use of the current ersatz pop sociological term “tribe”, there are no tribes in America, unless it is American Indian tribes. There is class conflict between the older Business-Working Class and the newer Knowledge Class, but not tribal bonding and conflict). “Tribe’ is just a cliche mainly used to denigrate the the Business Class but can be used both ways).

The insurance team at the conservative Washington, D.C. think tank Heartland Institute has split from that organization and has formed a new research and policy organization known as R Street Institute.

The divorce came after a controversial anti-global warming campaign by Heartland caused some of its corporate backers including insurers to drop their affiliations.

The Heartland ad campaign involved a billboard posted over the Eisenhower Expressway in Chicago that compared those who believe in global warming to murderers. “I still believe in global warming. Do you?” the billboard said next to a photo identified as Unabomber Ted Kaczynski. It displayed the web address for the Heartland organization.

The Heartland Institute has long questioned whether man-made global warming is a crisis.
Among the insurers that reportedly pulled their support were State Farm, the Association of Bermuda Insurers and Reinsurers, and Allied World. Other corporate sponsors also severed ties.
Eli Lehrer, who headed the Center for Finance, Insurance, and Real Estate within Heartland and is now president of R Street Institute, said the “extremely ill-advised” campaign upset insurance backers of his team’s work and made it impossible for him to remain at Heartland.

“All insurance is about the business of risk. Whatever you think about climate change and global warming, whatever one thinks is going to happen in the future, there is no doubt whatsoever that a great many people think there is significant risk of climate change and of global warming,” Lehrer told Insurance Journal. “The result of that is a billboard that says people who believe that this will happen are similar to terrorists withdraws you from rational debate.”

In 1923, sociologist W.I. Thomas proposed what is now called the Thomas Theorem:

“If men define situations as real, they are real in their consequences”

In other words, the interpretation of a situation causes the action. This interpretation is not objective. Actions are affected by subjective perceptions of situations. Whether there even is an objectively correct interpretation is not important for the purposes of helping guide individuals’ behavior or institutional policy. This is an extension of the notion of the religious-like Self Fulfilling Prophecy, defined by sociologist Robert K. Merton as:

“The self-fulfilling prophecy is, in the beginning, a false definition of the situation evoking a new behavior which makes the original false conception come true. This specious validity of the self-fulfilling prophecy perpetuates a reign of error. For the prophet will cite the actual course of events as proof that he was right from the very beginning.”

If government redefines every natural disaster and extreme event, even non-extreme weather patterns, to global warming, the insurance industry may have to insure against such fictional losses. It is not the extreme events that have changed, but their definition. It is in this context that the insurance industry-backed R Street’s positions should be viewed.

His group has in the past forged alliances with several environmental, consumer and tax groups on issues.

Among the issues Lehrer’s team addressed in the past are the Florida Hurricane Catastrophe Fund, the North Carolina auto insurance system, the national flood insurance program, the California Earthquake Authority, and proposals for new taxes on insurance.

As a victim of the “national flood insurance program” living 453 feet above sea level and never flooded, I find no redeeming free market virtue of being forced into paying for wet weather Obama Care.

Once governments like California’s define everything as caused by man made global warming (or its clone, climate change), the amount of insurance needed to protect from catastrophic loss becomes capacious. “Acts of God” used to be uninsurable.

EXCERPT: So the Act of God defense may become impossible to win for a superstorm if man-made contributions were a factor – but is this meaningful? The defense has never been successfully asserted in any event. But if an alternative causation for a superstorm can be proven by a preponderance of the evidence, there is a potential basis for the responsible party under CERCLA or a tort theory to seek contribution or otherwise allocate a proportionate share of liability to others. And the large number of “other” potential defendants who contributed to global warming will raise difficult issues of justiciablity. The recent superstorms may produce a test case with the right combination of circumstances to squarely present these issues to a court.

That is, while not a complete defense, climate change may provide new theories for defendants. When a door closes, a window may blow open.

[…] At the same time as RFF gets energy-realistic, fossil-fuel foes are isolating themselves with emotional outbursts (see Jaffe and Sachs here). And pretend free-market carbon taxers at front-groups such as R Street and Niskanen Center are getting nowhere–and increasingly ignore/violate classical liberalism in their (Left-funder-driven) pleas. […]